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Economy

China Telecom aims to set up services in the Philippines

Deal would mark a major step in President Duterte's growing ties with Beijing

The "privilege" given to China has sparked security concerns among some in the Philippines.   © Getty Images

MANILA A possible bid by China Telecom to break the Philippines' telecommunications duopoly has excited potential local partners, but it has also stirred security concerns.

China Telecom has been endorsed by the Chinese government to invest in the $5.3 billion Philippine telecom sector, officials in Manila said on Dec. 10. China Telecom told Reuters it was studying an investment. The state-owned company is one of the three telecom carriers in mainland China.

Foreign companies are limited to 40% ownership in Philippine public utilities, including telecommunications, which means China Telecom would be required to team with a local partner.

Philippine companies that have assets China Telecom could use for its expansion are eager to partner. Philippine Telegraph and Telephone, which has a telecom franchise, is interested in joining up with China Telecom, Chairman Salvador Zamora told local media. "We are in preliminary talks with them, but ... it is their decision which company to partner with," he was quoted as saying by GMA News.

The National Transmission Corp. said it was willing to partner with China Telecom, which could use the government-run company's power transmission assets for broadband infrastructure.

Since 2011, the country's telecom sector has been a virtual duopoly of two private players -- Japan's NTT group-backed PLDT and Globe Telecom, a joint venture between the Philippines' Ayala Corp. and Singapore Telecommunications. A planned joint venture between San Miguel and Australia's Telstra to challenge the duopoly collapsed last year, prompting San Miguel to sell its telecom assets to PLDT and Globe.

SECURITY ON THE LINE Clamor for a third player has grown in recent years amid customer complaints of slow internet speeds.

At a meeting last month with Chinese Premier Li Keqiang, Philippine President Rodrigo Duterte invited China to invest in the telecom sector as part of Manila's efforts to deepen ties with Beijing.

However, "the privilege to operate the third telecoms carrier in the country," as Duterte's spokesperson Harry Roque disclosed last month, has sparked security concerns among some in the Philippines.

Former President Benigno Aquino, whose administration took a tough stance on China's expansion in the South China Sea, said in late November that entry by a Chinese telecom company into the Philippines would have "national security implications."

On Dec. 13, former National Security Adviser Roilo Golez called the move "a grave national security threat."

"China remains a real territorial threat to our West [Philippine] Sea," Golez said on Twitter. "And now we will allow the Chinese government controlled ... telco to have access to our innards, brains and secrets."

Duterte has temporarily set aside the maritime controversy in order to revitalize his country's ties with China.

Security concerns over Chinese companies' participation in foreign telecom industries are not unique to the Philippines. The U.S. in 2012 banned the procurement of telecom equipment from China's Huawei Technologies and ZTE, citing risks to national security, and India made a similar move against China in 2010, according to earlier reports. The Chinese government uses its Great Firewall to block unwanted web content from abroad and routinely cracks down on domestic websites.

Roque said on Dec. 12 that the government will review the security issues. "As far as security considerations are concerned, we will look into that because there are really concerns overall on cybersecurity in general, and it's been a priority of the government anyway," he said.

Hermogenes Esperon, the president's national security adviser, played down the concerns. "The two telcos have [shareholders from] Japan and Singapore. Is that a security threat?" he said on Dec. 12.

Both PLDT and Globe Telecom also count Huawei and ZTE as major telecom equipment suppliers.

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